Lufthansa clears hurdle in bid for Austria Airlines

A week of frenetic aviation merger activity across Europe culminated Friday when the Austrian government accepted an offer for its flag carrier from Lufthansa, which would allow it to become the biggest airline in Europe.

Just days after British Airways announced that it was in merger talks with Qantas of Australia and Ryanair renewed a bid for Aer Lingus, Vienna agreed Friday to sell its 41.6 percent stake in Austrian Airlines to the German flag carrier for €336,000. Lufthansa could pay a further €162 million due in three years, depending on its profitability.

Airlines reeling from high oil prices and plummeting demand are forging partnerships at an unprecedented pace to seek shelter from the financial stress that has downed 30 airlines this year.

"It is not easy to privatize a myth," Peter Michaelis, chief executive of the Austrian privatization agency, OIAG, said at a broadcast news conference in Vienna to announce the deal. "We have had heavy turbulence during the flight and very bad weather; the important point being that together we will able to land safely and touch ground."

A €500 million rescue loan, repayable once the deal has closed, will be made available to Austrian Airlines from the Austrian government to inject immediate liquidity into the company, Michaelis said. He added that the deal met all of Vienna's conditions.

Lufthansa hopes to buy out all of Austrian Airlines' remaining shareholders with an offer of €4.44 per share in a second phase of the takeover, early next year, which would give it full control. On Friday the shares closed up 4.3 percent at €3.86.

A five-member trust with veto rights will oversee the interests of Austrian Airlines over the next five years.

The deal requires approval from European Union competition authorities. Wolfgang Mayrhuber, chairman and chief executive of Lufthansa, said he did not envision "crossfire" from that quarter.

The two airlines already cooperate in the Star Alliance airline grouping that also includes Swiss International Air Lines, with which Lufthansa has already successfully merged, and BMI of Britain, in which Lufthansa has just increased its stake.

Get the full story at Herald Tribune